After having trouble finding the right bid management tool or bid management subcontractor / agency, I will start a series on my search for the right PPC bid management. Here part 1:
After being burned by a big NYC agency last year, I took the bid management back in my own hands and let the agency do their job with some other clients. Today I started looking into some other agencies and found an interview with Anil Kamath, primary architect at Efficient Frontier.

Anil speaks about the limitations or rule based bidding and the advantages of portfolio bid management. Here Efficient frontiers take on:

"There are three main things actually. First you'll have to get data about the market place, and about conversions in the market place. We get data from a wide variety of sources. A lot of it comes from the search engines. A lot of the data comes from our customer's accounts themselves; we also track conversions for our customers. We get information from various sources on keywords themselves as to which keywords are related to which other keywords. This is the first step, getting that data on a regular basis.

The second part is taking the data and coming up with a forecast. We use various statistical methods to make these forecasts very accurate. So, when we say forecast, we are saying forecast down to the ad level. For example, this keyword targeted at this geography, with this ad copy will get fifty clicks if it's bid to two dollars at position two. It will generate seventy clicks if it's bid to five dollars, and it's at position one. So, we come up with very granular forecast, based on the data that we have, and using various statistical methods to make these forecasts very accurate. So, the forecasting is the second part. These forecasts then go into the optimization system, which is essentially a linear programming solver"